The secret to building a brand: LOVE

Volumes 5&6, 2015

By Lei Na

Xia Guoxin (CEIBS EMBA 2005) is well known in fashion circles as the creator and guardian of Ellassay, a Chinese brand of women’s clothing. But he’s still not used to being in the spotlight. So when he came to Shanghai last Fall to speak at a CEIBS Alumni Forum, he was surprised to see a poster promoting his lecture. “Why is my picture so big? You can see all my flaws now,” he says with a laugh as he readies for the day’s event which also included a study of The History, a renowned work on ancient Chinese history by Sima Qian.

Xia, known for his penchant for wearing all black, is also known for transforming the Shanghai Stock Exchange (SSE) into a catwalk. When he took his company public on April 22, 2015 (Shenzhen Ellassay Fashion Co Ltd / 603808), the IPO launch ceremony came with a fashion show. “This was the first time [something like this was done for an IPO] anywhere in the world,” Xia says in an interview while on campus. “When our team proposed the show, the executives at the SSE were excited… but worried. A fashion show is a huge project after all. But they still approved it. I think they were innovative in doing this.”

Last October when owner of the Spanish clothing brand ZARA, Amancio Ortega, overtook Bill Gates to become the world’s richest person, it was a fillip for the apparel industry. It was also affirmation of Xia’s earlier quip on Sina Weibo, in 2011, that despite Hong Kong mogul Li Ka-shing’s numerous assets, his total wealth was not even half that of Ortega’s. For Xia, this is an indicator of the great potential of China’s apparel industry. But while he recognises how lucrative the industry can be, he will be the first to explain that the Ellassay IPO was not about creating millionaires, but about building the brand and funding further development. Brand building, says Xia, has a lot riding on love.

“Don’t worry about anyone hating you. The important thing is that there are those who love you,” he says during the CEIBS Alumni Forum. He believes love can make a brand great by attracting customers and investors. His passion and love for his brand was what convinced Carlyle General Manager Zu Wencui to invest RMB150 million into Ellassay in 2009 as the financial crisis raged and most investors were slamming their wallets shut. “When I met Xia for the first time, we did not discuss money. We talked about how to patiently establish an international brand over the long term,” explains Zu. “Many entrepreneurs do things only for the money. We do not often meet entrepreneurs who tell us their first wish is to create a company and a brand. This is the reason why he attracted my attention.”

It always helps to have a good story behind any brand, and Xia’s definitely fits the bill.

After earning a Master’s in Apparel Studies from Tianjin Institute of Textile Science and Technology in 1994, he worked in Shenzhen to earn enough money to start his brand in 1996. When thinking about what the name should be, he thought of the Avenues des Champs-Élysées in Paris, hoping to one day open his store in a place where many of the world’s top brands have a presence. He rang up the French Embassy in China to ask about the spelling of Champs-Élysées and ultimately was inspired by its latter half in naming his company. Since then, “Ellassay” has been his most precious treasure, and the 19 years of hard work that followed helped him realise his dream.

With the launch of Ellassay’s latest autumn and winter collection in New York, Xia is beginning yet another dream. The collection is promoted with a short film titled Timeless Love, starring international supermodel Sigrid Agren. The model’s serenity and grace, and the subtle background music remind viewers of the brand’s Asian origins. For Xia, a brand is like a crystal ball – it has an alluring magic, yet is fragile and needs constant care. “A brand exists in just one place – the customers’ heart. If they like it, the brand will command greater value, but if they don’t, it will disappear.”
Here is Xia’s exclusive interview with TheLINK.

TheLINK: Can you briefly explain Ellassay’s brand positioning?

Ellassay seeks the balance between life and career. Our customers are successful women, usually career women, who are also daughters, wives and mothers, with independent lifestyles and discerning taste. They may be lawyers, doctors, senior corporate managers or entrepreneurs, who want elegant, graceful and feminine clothing that suits their lifestyle. This is Ellassay clothing.

TheLINK: After 19 years of development as a private company, Ellassay did an IPO. What has this transition to being a public company been like?

When the market tides rise, all brands benefit. Only when they ebb will people see which practices have been correct. Ellassay has an overall plan for opening stores and will not open a single store to chase short-term profit. We have always had just one brand. When business is good, creating a second brand can be very profitable, but I have resisted the temptation to do this. I think among all the leading apparel companies it’s rare to have just one brand. From this perspective, we are truly different from other brands. After our IPO, we added our second brand through an acquisition (in September 2015, Ellassay bought out the Chinese partner of the German women’s wear brand Laurél). I’ve always believed one should not concentrate on just short-term goals, but look ahead towards the long-term, and hope that the future will be good. My goal is to take care of our brand. This industry is complicated and changes quickly, but if you like this business, everything will be fine. If you like it, even the challenges will bring you joy.

TheLINK: How do you promote innovation within the company?

The most important thing for corporate innovation is a free environment. Generally speaking, tyranny makes it difficult to innovate, while democracy encourages it; centralised power does not encourage innovation, while delegated power does. You have to allow failure to have innovation. When people get something wrong or fail, you should not immediately criticise. They should understand what went wrong before they try again. I think a power structure which allows for delegation is very important to corporate innovation. Delegation, and the subsequent freedom, allows employees to act according to their own ideas and standards, and so innovation will naturally arise.

TheLINK: Among your industry competitors, who do you most respect? Who do you most appreciate in terms of management?

Globally, I admire Uniqlo founder Tadashi Yanai the most. He is an expert in the apparel industry, and is conscientious in business. He always conducts field research, and puts quality first. He also has a great passion for the future. He has built Uniqlo into a stylish brand. Uniqlo was launched in the 1980s and 1990s, when the Japanese economy was suffering through a recession. Twenty years on, Uniqlo has grown into a popular global brand. When we look at China, we can see that the economy may have short-term problems, but this does not necessarily mean the apparel industry also has to suffer. Maybe one day we will also have our own world-class brand.

In terms of management, my idol is definitely Peter Drucker. I began to study Drucker in 2004, and I’ve been recommending his works to my colleagues. Every Wednesday our company will have special meetings to study Drucker, and I host the meeting for our management team. It has been 11 years. I’ve been deeply influenced by Drucker’s management thinking.

TheLINK: You donated to CEIBS a plate with the inscription “Learn today, not tomorrow”. Why do you put so much emphasis on learning?

I think learning is a part of my history. When I first launched the business, I thought I was a master and knew everything, and I spent most of my time on work. Then in 1999 I suddenly realised that I had become increasingly busy, while my employees did not have that much to do. When they did not perform up to my expectations, I would criticise them, and they did not agree with my criticism. I began to understand that it was my management style that was at fault, so I got an MBA degree from a US school. It was conducted in English. It was really tiring, but I learned a lot. After that I never stopped learning. I think CEIBS is the best business school I’ve attended, and in the rigorous environment here I’ve learned a lot about management. I still remember the opening ceremony when the President told us to be honest entrepreneurs.

TheLINK: Traditional brick-and-mortar stores are now facing challenges from online sales. What do you think of the competition between the two channels?

Last time I attended a forum, the owner of a department store shared his perspective before my speech. He spoke about the problems facing the retail industry, and how to win back customers by improving the shopping experience, adding new kinds of goods, and decorating shop windows. I said my views were the same. Online retailing is to the traditional retail business what catfish are to a school of other fish. Though catfish will eat the other fish, they won’t eat them all. Eventually there will be both catfish and other fish swimming fast together. As I see it, online retailing will coexist with traditional retail stores in the future. Brick-and-mortar stores will have to upgrade themselves. You have to add to the customer experience, and embrace the Internet; but don’t be scared by it or stake all you have on it, thinking that brick-and-mortar stores have no future. I think upgrading is the most important thing.

TheLINK: Your generous donations to CEIBS have been greatly appreciated. What is your opinion of corporate social responsibility?

I think you have to follow your heart, and do as much as possible if you can. What is the point of having more money? If it is just sitting in an account, it’s just a number. If you can use it to help others then I think you should.

Of course, an entrepreneur’s greatest value is not charity, in my opinion. First he has to run his business well, stay profitable, earn his money cleanly, and bring happiness and joy to his employees. If, as an entrepreneur, you cannot even make those following you happy, what is the point of doing greater charity work? I think that’s where the greatest responsibility lies. If every company can be this way, society would be very harmonious.

Sound bites

You have to narrow down your fashion brand’s target market. If you try to satisfy everyone, you’ll leave everyone unsatisfied.

A brand is like Maotai, the more fragrant the taste the more ancient the brew. We often hear people say that as a brand becomes old, many of its practices become old-fashioned.

A boss should always try to find outstanding talent. It’s best to find those who are better than yourself in certain aspects. Every time you hire a new employee, try to improve the overall quality of the team.

The best management is minimal management. The ancient Chinese sage Xunzi said, everything under the sun “grows in different soils”, and the sun’s contribution can be easily seen despite the fact that it doesn’t interfere directly. It’s the same with management.